More

NextDC up 4pc as it closes $672m raise

NextDC has completed its $672 million capital raising, which analysts say is larger than expected and sends a signal to competitors that the data centres company is ready and able to deliver material capacity increases.

The raise – priced at $7.80 per share, a 9.4 per cent discount to its five-day volume-weighted average price for institutional investors – was well received. Investors pushed the shares up 4 per cent on Friday morning, but the shares were 2¢ lower at $9.16 by mid-afternoon.

Craig Scroggie's data centre business has proven to be resilient to the COVID-19 downturn. Anna Kucera

"Achieving such a comprehensive take-up of the placement in the current market environment again serves to reinforce the strength of investor support for NextDC," chief executive Craig Scroggie said.

"We continue to see significant growth in underlying demand for cloud services, with the success of this placement ensuring NextDC does not lose critical momentum in pursuing growth opportunities."

Related Quotes

A note from Citi analyst Siraj Ahmed said the raise removed balance sheet concerns for the business.

"The acceleration of S3’s development ensures that NextDC does not go ‘dark’ in Sydney," he said.

"While NextDC is not completely immune to a recession, we see its recurringrevenue base and earnings visibility as strengths, underpinned by long-term contractsand a sticky customer base."

Mr Ahmed upped his target price from $9.55 to $10.25 and upgraded his financial year 2022 earnings before interest, tax, depreciation and amortisation forecast by 2 per cent, despite lowering his 2021 EBITDA estimates because of the COVID-19 economic slowdown.

"We see potential contract catalysts ahead across Melbourne/Sydney for this defensive-growth recurring-revenue infrastructure play," he said.

On Thursday Mr Scroggie said the company could have chosen to "batten down the hatches" and still have emerged a winner of the COVID-19 downturn, but he wanted to take advantage of the opportunity ahead of the data centre player.

"We could have done nothing ... and just been massively successful for the next few years, but the opportunity is too great to pass by," he said.

More than 10,000 people poured into the nation's capital on the ninth day of protests over police brutality, but what awaited them was a city that no longer felt as if it was being occupied by its own country's military.